Details: Joint EU - IMF Programme for Ireland

[dockingtrade]

the 5.8% will force the govt to eventually do the slash and burn.

 

[Brendan Burgess]

We know at this stage that we will be pumping something like €50-€70bn into the banks. Can someone point out in objective monetary terms a costlier alternative? I challenge the people who believe the bank bailout by the state is the correct course of action to come up with the figure at which the cost would have been prohibitive.

Der Kaiser

Most of the money has already been pumped into the banks.

The additional money at the weekend was for recapitlization and funding rather than to pay for the losses.

€50 billion of the facility is for day to day spending such as the health service, social welfare and pensions.

Brendan

 

[DerKaiser]

Der Kaiser

Most of the money has already been pumped into the banks.

The additional money at the weekend was for recapitlization and funding rather than to pay for the losses.

€50 billion of the facility is for day to day spending such as the health service, social welfare and pensions.

Brendan

Yep I know we've put something like €35bn into the banks to date to cover losses. As you point out, once the money is in it's in, so we'd be very unlikley to ever see what we've put in already.

We are at a point though where the money to boost the capital ratio to 12% (€10bn) and the additional contingency capital (€25bn) has not yet been committed (as far as I know).

I would love to see the logic behind any confidence that these so called 'capitalisation' measures do not simply succumb to further losses.

Are we happy to throw this additional €35bn into the black hole?

And if this proves insufficent (perhaps this will occur when we have mass mortgage defaults as interest rates rise, unemployment rises and disposable incomes plummet), do we stop at €70bn?

Then there's the additional €50bn in budget deficits to run the state in the next number of years.

I think the part of the €50bn not relating to debt interest on bank bailout money obviously needs to be paid by the state as there is a very clear link that we are spending it on ourselves collectively as a state.

All we can do here is try cut the budget deficits as quick as we can and avoid saddling ourselves with an outrageous level of debt interest from borrowing to cover bank losses.

 

[cremeegg]

I am missing something here.

They have made a fund of €50m available to us at 5.8% to fund the exchequer deficit. If they had not done so, we would have to borrow it on the bond markets at around 9%. And this is to pay for social welfare, old age pensions and the health service.

Many of us have taken our money out of the Irish banks, so they have made a further €35b available to replace this money.

All we have had to do, was to contribute €17.5b of money we had elsewhere.

Why do people think that this is a bad deal? Do they want us to default on paying salaries to public servants, social welfare and old age pensions?

Yes Brendan, I do think you are missing something. I don't want the govt to borrow a further €85bn. It seems madness to me.

And yes I do have a better idea. Don't borrow €85bn and live on the €30bn income the govt has.

We are borrowing money that will have to be repaid in future years to fund todays standard of living. Thats madness.

Other countries have done borrowed like this in the past with some success, because future nominal growth (including real and inflation elements) reduced the debt burden. Indeed this eased Ireland's problems in the 1980s. I don't think that this escape route will be open in the coming years. The period of continuous growth the western world has enjoyed since WW11 may be coming to an end. This because of adverse demographics and the rise of other economies.

For Ireland to take on huge new borrowings now is madness. I don't want to default on public sector salaries etc. I just want to cut them to a level we can afford.

 

[Purple]

The "we can't stop now or we'll lose what we've put in" is like a gambler at the table upping the stakes in order to chase his losses.
Just like a gambler we can’t keep going forever as eventually we’ll hit the house limit.

 

[Firefly]

The "we can't stop now or we'll lose what we've put in" is like a gambler at the table upping the stakes in order to chase his losses.
Just like a gambler we can’t keep going forever as eventually we’ll hit the house limit.

It's the political fallout that IMO is driving this mentality...FF being remembered as losing xxbillion forever...a lot worse than those e-voting machines. The correct way (as hard as it is) is threat the money already spent as spent and non-recoverable...ie a sunk cost
http://en.wikipedia.org/wiki/Sunk_costs